Brand valuation – 7 applications

Since seven seems to be the magic number which relates with brand value and brand valuation let’s check seven applications of brand valuation:

External investor relations Mergers and acquisitions were the original driving force for brand valuation. Now many successful companies use brand valuation as an ongoing business performance indicator: to help ensure that brand strength is reflected in share value.

Internal marketing management Brand valuation is increasingly being used as a management tool in leading organizations. For example: brand valuation figures can be used to evaluate new product and market development opportunities, to set business objectives or allocate budgets.

Internal royalty rates Across a large organization there may be many affiliates, subsidiaries or divisions that make use of any particular brand. As the profit potential of brands becomes more clearly understood more companies are charging royalties, across their business operations, for the use of these brand assets.

Licensing and franchising Where companies allow outside organizations to use their brand, on a licensing or franchising basis, a brand valuation can lay the foundation for appropriate charges.

Tax planning As the management of brands as financial assets becomes more sophisticated, so tax authorities around the world have started to take an interest in how these assets are managed. The result is that more and more international organizations are planning the most cost-effective domicile for their brand portfolios and are organizing their tax affairs with their brands in mind.

Securitized borrowing Even in the conservative world of banking, the asset value of brands has been recognized. As a result brands have been used to secure loans, especially in the US, where companies such as Disney have borrowed significant amounts of money against their brand name.

Litigation support Brand valuations have been used to support litigation against the illegal use of a brand name (as a basis for calculating damages, for example) and also in cases of receivership, to prevent the assets of the business being undervalued.